Why Do TNCs Relocate their Manufacturing Industries?

Manufacturing industries and waste disposal industries are generally moving from high income
to low and middle income industries. This is for several reasons.

Benefits to LIC/MICs: 
 Manufacturing gives the opportunity for a low/middle income country to develop its
economy
 FDI is welcomed by LICs and MICs with low taxes, cheap land, and government-paid
improvements to infrastructure
 There may be low levels of environmental regulations in lower income countries

Drawbacks to HICs:
 It is harder to find workers willing to engage in dangerous occupations in higher income
countries
 The higher income of workers in HICs may cancel out any benefits of tax incentives and
good infrastructure
 Increasingly high awareness of environmental issues has led to massively increased
environmental regulation in HICs

There is a debate over whether TNCs (Trans-National Corporations) deliberately move polluting
industries overseas. A 1970s report by a US environmental consultant found that many
companies had moved from the US to Mexico to produce dangerous materials such as asbestos
and arsenic. However, in the 1980s a contradictory report found that although environmental
concerns would be one part of a relocation study, “they were never strong enough to outweigh
all the traditional forces that determine investment and location decisions” including raw
materials, energy supplies, labour, transport, political considerations, climate and the local
market. In the 1990s a mixed picture emerged, suggesting that any economic benefits of
environmental degradation were short-lived due to growing awareness in the destination
countries.
The concept of a pollution haven is that in a globalised environment, manufacturers are able to
move to the places with the lowest environmental controls and thereby make greater profits.
However, in practice there are no such specific areas. This is because companies are afraid of
litigation and a negative public image, as well as being genuinely concerned about the
environment. In any case, as the destination develops in terms of GDP it is likely those
environmental concerns will grow and controls will be placed on manufacturers. Therefore, the
level of pollution may be low, then increase with industrialisation, and then decrease again. 

What is more likely is that there are pollution zones. These may not be “based on national
environmental standards…but instead be areas of poorer people, where firms perform worse
and where regulations are less effective” (Zarsky 1999, in Planet Geography 6th ed.).

The concept of a pollution haven is that in a globalised environment, manufacturers are able to
move to the places with the lowest environmental controls and thereby make greater profits.
However, in practice there are no such specific areas. This is because companies are afraid of
litigation and a negative public image, as well as being genuinely concerned about the
environment. In any case, as the destination develops in terms of GDP it is likely those
environmental concerns will grow and controls will be placed on manufacturers. Therefore, the
level of pollution may be low, then increase with industrialisation, and then decrease again. 

What is more likely is that there are pollution zones. These may not be “based on national
environmental standards…but instead be areas of poorer people, where firms perform worse
and where regulations are less effective” (Zarsky 1999, in Planet Geography 6th ed.).